Checklist before Investing in Energy - dummies

Checklist before Investing in Energy

By Nick Hodge, Jeff Siegel, Christian DeHaemer, Keith Kohl

As an energy investor, if you decide to leap into oil and natural gas futures, have identified the associated risks, meet all the qualifications, located the perfect broker to suit your needs, and are ready to start trading after doing all your due diligence, then there are just a few more questions to ask yourself before you begin.

The following is an easy and helpful checklist the U.S. Commodity Futures Trading Commission put together to review before conducting any trades. You should definitely take this one last step.

  • Have you clearly identified your financial goal, including the amount of risk and loss you can sustain?

  • Have you determined how much assistance you want from a trading advisor in making trading decisions?

  • Did you double-check the registration status and history of the advisor or pool you chose with the National Futures Association, or NFA?

  • Did you receive and review the disclosure document before opening your account? The disclosure document gives you the statement of fees, potential for loss, your right to withdraw funds, and a break-even analysis.

  • Do you recognize that you’re trading a contract for only a small portion of the entire value, which opens the door for a flood of gains, as well as substantial losses? Make sure your account doesn’t fall below the minimum margin or else you’ll have to deposit more cash or be forced to exit your position.